UBS has upgraded Birkenstock Holding PLC (NYSE:BIRK) to a "buy" rating, citing three key improvements for the change.
First, the expansion strategy for the sandal-maker's direct-to-consumer (DTC) offering has outperformed expectations, driving significant growth.
Second, the German company is rapidly expanding in the Asia-Pacific region, capitalizing on new market opportunities.
Third, Birkenstock has successfully introduced premium-priced products, boosting average selling prices (ASPs) and enhancing its sales mix.
UBS has raised its five-year earnings per share (EPS) compound annual growth rate (CAGR) forecast to 25% from 21%, with a new fiscal year 2026 EPS estimate 10% above consensus.
UBS believes continued strong growth and upward EPS revisions will elevate the stock's valuation towards their new price target of $85, representing a 63% increase.
Additionally, the removal of previous concerns about brand momentum, conservative fiscal year 2024 guidance, execution risks from new factories, and stock liquidity has reduced overhangs on Birkenstock's shares.